Blackstone Group issued compensation details for the first time Monday, disclosing in a filing that its co-founders will receive at least $2.33 billion after the private equity firm goes public.
CEO and Co-founder Stephen Schwarzman received nearly $400 million in pay last year and stands to make at least $449.2 million after the investment firm goes public. The post-IPO payout could grow to $677.2 million, the filing says.
Schwarzman will own 23 percent of Blackstone after the IPO, expected in the next few weeks. Should the IPO price in the expected range of $30 per share, Schwarzman's stake would be worth $7.73 billion.
Blackstone also said it paid co-founder Peter Peterson $213 million last year and will pay him $1.88 billion when the firm goes public. Peterson is cashing in most of his stake and keeping 4 percent.
Blackstone said it expects to record significant net losses for a number of years after the IPO as a result of payments related to certain assets and compensation.
"It's very, very rich for the founders. I think it's going to raise a lot of eyebrows. You're talking about $2 billion," said attorney Steve Howard, chairman of the investment funds group at law firm Thacher Proffitt & Wood.
Referring to the level of net losses Blackstone outlines, he said: "I think it is significant. It's not a deal breaker or a blemish, but they have found that there are significant tax implications to this deal."
Some IPO analysts said that given Blackstone's model and the type of offering it is pursuing, the prospect of net losses was not surprising.
"I would not at all be phased by that," said David Menlow, president of IPOfinancial.com, which analyzes IPOs. "This is not about what's going to happen on a year-over-year basis."
Blackstone earns the bulk of its money through its private equity investing, buying companies with borrowed money and selling them one to five years later. It invests in public and private companies, distressed debt, hedge funds and real estate, among others.
Blackstone said it would pay its president, Hamilton James, at least $147.9 million after its IPO. He earned $97.3 million last year.
By comparison, Goldman Sachs CEO Lloyd Blankfein earned $54.3 million in fiscal 2006, while JPMorgan & Co. CEO Jamie Dimon brought in $27.5 million. The hefty earnings by Blackstone executives, while steep, still places them on par or even below that of certain hedge fund managers.
A list of 26 hedge fund managers compiled by Institutional Investor's Alpha magazine put their average, 2005 payout at $363 million.
Blackstone had net income of $2.27 billion last year, up 71 percent from the prior year, according to a previous filing.
The executive earnings detailed in Monday's filing are not annual salary but reflect their economic stake in the firm and Blackstone's huge profits gained from its investment portfolio.
The New York-based M&A advisory and investment company started in 1985 with $400,000 and now has $88 billion under management.
Details of the executive earnings were eagerly anticipated, as Blackstone will be the first major U.S. private equity firm to go public in a hot leveraged buyout market.
With frothy debt markets and a steady economy, private equity firms are experiencing one of the best investment climates ever, hauling in more than $400 billion of deals in the first half of this year alone -- more than triple the total in the year-earlier period.
And Blackstone is among the most high-profile and aggressive of the private equity buyers, snapping up such huge assets as Equity Office Properties Trust, Freescale Semiconductor and Michaels Stores.
In March, Blackstone filed to take 10 percent of the firm public in an IPO worth $4 billion. Last month, it said China would take a $3 billion stake.
Blackstone said its private equity fund had $19.6 billion in committed capital, making it the second-largest such fund behind Goldman Sachs.